BANKS AND FINTECHS: THE CHALLENGES THAT LEVEL THE PLAYING FIELD

Matt Phillips, Vice President, Head of Financial Services, UK & Ireland at Diebold Nixdorf

By Matt Phillips, Vice President, Head of Financial Services, UK & Ireland at Diebold Nixdorf

The challenges faced by every bank today are broad and multifaceted. But, when it comes to how banks are engaging with their customers, the role of digital technology is taking the industry towards a significant crossroads. Emerging tech is challenging existing business models and has been for some time. Combined with the shifting demands from customers and how they want to interact, I believe that getting digitalisation right remains the biggest challenge for banks when it comes to engaging with and building relationships with their customers.

For some time now, fintechs have been shifting the banking marketplace and have been threatening to shake the foundations of long-standing institutions. However, larger institutions have, so far, held firm through their retention of loyal customers, who trust the stability and traditions of older, more recognised financial brands. Many banks now face a very similar challenge: how to stay relevant in very fast moving and unpredictable times. This goes hand in hand with the need to attract and retain younger generations of consumers. And I believe that these challenges are not something fintechs are immune to.

Whilst transformation was already in progress across the industry, the impact of the pandemic, and the significant extent to which it has shifted the way society interacts, has accelerated consumer demand for hyper-personalised and connected experiences – a challenge that digitalisation seeks to assuage. In order to compete, banks must master three key strategies to curate value: a customer-centric approach, experiential marketing, and the gamification of its services.

A Customer-Centric Approach

A customer centric approach is something that should engage and excite customers. And it is something that many companies claim to do, though the most successful companies are the ones that can sustain it. Such brands have this ingrained in their DNA – it is a part of who they are, and how customers recognise and attach themselves to the brand. The need for a customer-centric approach is being driven by the high levels of hyper-personalisation already seen in the retail sector. Consumers are expecting to see the same tailored offerings, suggestions and curated experiences that they get from their favourite retailers in the banking sector. Companies such as DePop, Amazon and Asos have pioneered and channelled this approach, helping to generate high sales, as well as customer loyalty. These super-fluid experiences have transformed how customers manage their financial lives, making it as seamless and as frictionless as possible. The technologies that enable these experiences are table-stakes for the banking sector today.

Experiential Marketing

Another challenging element to digitalisation is how to bring the digital world into the real world. How can banks bring the digital experiences they’ve worked so hard to create into the daily, physical lives of their customers? It is well documented that there are significant numbers of banking customers who still want to bank in-branch, and for these customers, creating great in-branch experiences is vitally important to how they manage their finances. The physical layout and function of banking spaces has changed so much in recent years. Banks like Metro Bank and Halifax (among others) have pushed the boundaries in this space, creating physical spaces that blur the lines between multiple aspects of Life. Nowadays, banks have cafes, communal workspaces and other functions. Banks must do more than just offering financial experiences; they must offer interactive, vibrant and enticing experiences for their customers. By contrast, the disappearance of physical branches from high streets has given rise to a different experiential challenge to banking customers, notably the emergence of joint banking hubs such as the Post Office or self-service machines.

For digital-first banking customers, bringing the physical experience of banking to life needs an altogether different solution. Experiential events such as pop-up store experiences, hackathons and meet-ups are all successful mediums when it comes to differentiating a brand from its competitors and building an inclusive environment. These events provide physical touchpoints for customers, enhancing emotional connections to a brand. Additionally, banks are capitalising on how interacting with the brand in a physical environment via the post office, helps to build a more personal relationship in an otherwise increasingly digitised world. For example, Stripe, a fintech founded in 2010, sends welcome packages to new customers; a gesture that both makes the customer feel valued, but also allows them to physically experience a brand that they’d otherwise only interact with digitally.

Gamification

Gamification is where the worlds of digitalisation and psychology collide. It has endless opportunities within the world of banking and is a way that banks can support their customers in building better financial futures. Essentially, gamification is the idea that customers are more likely to meet their financial goals if they can tap into their brain’s reward circuitry via small, incremental and easily achievable “wins.” By applying a competitive mindset to money matters, dopamine in the brain is triggered. This can be achieved through setting goals, tracking progress and hitting milestones to unlock some kind of reward.

In the financial realm, there are a number of apps and digital services that utilise gamification techniques to encourage its users to save money, budget better or improve financial literacy. This is an area of digitalisation within banking that still holds untapped potential. Most banks support customers by tracking spending, creating ‘pots’ and setting goals.

Digitalisation is set to continue shaping the face of banking for many years to come. As technology continues to evolve and drive innovation, the challenge for every kind of bank is how to bring the latest development to the fore for their customers. How can they use technology to make their experience easier, faster and more personalised? How does it help them to attract, retain and build a loyal customer base? And how will it shift the physical experience of banking? The banking landscape has changed so much in the last decade, and technology is only going to improve. It will be fascinating to see how the banking sector continues to adapt and evolve as new capabilities arise through digitalisation.